The list with mistakes, a lot of people make their personal finances, is long. I picked 10 out of it. After the first five in the previous chapter, here are number 6 to 10 mistakes people often do:
6. Buying a new car
Don’t get me wrong, I’m a car driver for 25 years and – outside Bucharest- enjoy to steer the S6 day by day. But I would advise you to think twice, when it comes to buy a new car. Before you press the pedal to the metal, be aware of the gigantic depreciation of new cars.
A Volkswagen ‘Golf’ for instance looses up to 30% of it’s value in the first year, a BMW Seria 5 is worth less than half after 3 years. You can save a lot of money – and still enjoy the drive – when you go second hand.
Should you ‘buy’ a new car with a loan, the financial pain multiplies. While your masina looses in value each year, the overall loan-costs rise with each year of the credit-contract. A loan of 20’000 RON with a dobanda of 9% p.a. over 4 years lead to total costs of 23’900 RON. Same figures over 10 years – you pay more than 30’000 RON to fulfill your obligation.
7. Unprepared negotiations
If you avoid mistake nr 6 and buy a second hand car, you can and should negotiate the prize. To improve your chances, you have to prepare the negotiations. Knowledge and information are crucial: to know that the asked price is something else than the real value and to know your leverage. Does the seller really need to sell or is he just testing the waters with his offer. For a closer look into negotiations, see chapter 6.
8. Regular overspending
Companies invest millions to seduce consumers. And I am not speaking about advertising.
When you visit a supermarket, fresh fruits and vegetables are usually positioned right at the entrance. Although this doesn’t make sense for the shopper, who will crush salad or the struguri with heavier items later, the fresh smells and bright colors make you feel positive. Plus, if you buy healthy food at the beginning of your shopping tour, you’re inclined to spend more on junk later.
A study showed, that a supermarket chain who simply increased the size of their trolleys, sold 40% more with the larger shopping carts.
Even the in-store music has one purpose only – to increase your spending. Slow music makes you shop for longer, whereas classical music makes you buy more.
And this is by far not all. You can pretty much assume that the whole supermarket is professionally designed to ‘help’ you spending more than you initially intended, when entering the store.
There is one simple solution to avoid overspending. Eat before you shop, make a list what you really need – and stick to that list.
9. Don’t understand financial investments
With all the money you save by avoiding mistake nr 8, you could spend nice holidays – or invest it. Chances are, that you not really understand the financial markets – a recent study showed, only 22 % of Romanians know basic financial concepts (see chapter Financials – To Know or not to know).
Well, this website is full of information how you could learn to invest, what’s important to know about the risks as well as chances on financial markets.
10. I don’t need help
One last big mistake many people make is to act alone or based on one single information. Always get a second opinion before you decide – but then take sole responsibility for you actions.
Sometimes, you make a money- mistake just because your expectations are wrong. Well, then you’re in good company. Some of the worst business-predictions made by powerful people, coming up in the next chapter: http://www.theleader.ro/predictions-reality/